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Did Hedge Funds Drop The Ball On Antero Resources Corp (AR) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Antero Resources Corp (NYSE:AR) based on that data and determine whether they were really smart about the stock.

Antero Resources Corp (NYSE:AR) was in 21 hedge funds’ portfolios at the end of March. AR investors should be aware of a decrease in enthusiasm from smart money lately. There were 25 hedge funds in our database with AR positions at the end of the previous quarter. Our calculations also showed that AR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to view the recent hedge fund action surrounding Antero Resources Corp (NYSE:AR).

What does smart money think about Antero Resources Corp (NYSE:AR)?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the fourth quarter of 2019. On the other hand, there were a total of 27 hedge funds with a bullish position in AR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is AR A Good Stock To Buy?

Among these funds, SailingStone Capital Partners held the most valuable stake in Antero Resources Corp (NYSE:AR), which was worth $15.2 million at the end of the third quarter. On the second spot was FPR Partners which amassed $12.6 million worth of shares. Shah Capital Management, Brave Warrior Capital, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SailingStone Capital Partners allocated the biggest weight to Antero Resources Corp (NYSE:AR), around 8.53% of its 13F portfolio. Shah Capital Management is also relatively very bullish on the stock, dishing out 5.63 percent of its 13F equity portfolio to AR.

Due to the fact that Antero Resources Corp (NYSE:AR) has faced falling interest from the entirety of the hedge funds we track, logic holds that there were a few hedgies who sold off their entire stakes by the end of the first quarter. It’s worth mentioning that Jim O’Brien and Jonathan Dorfman’s Napier Park Global Capital cut the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling about $1.6 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund dumped about $1.5 million worth. These transactions are important to note, as total hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Antero Resources Corp (NYSE:AR). These stocks are Howard Bancorp Inc (NASDAQ:HBMD), Tarena International Inc (NASDAQ:TEDU), OptiNose, Inc. (NASDAQ:OPTN), and Telenav Inc (NASDAQ:TNAV). This group of stocks’ market values are closest to AR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HBMD 6 10753 3
TEDU 2 3437 0
OPTN 11 16969 -5
TNAV 13 46283 0
Average 8 19361 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $51 million in AR’s case. Telenav Inc (NASDAQ:TNAV) is the most popular stock in this table. On the other hand Tarena International Inc (NASDAQ:TEDU) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Antero Resources Corp (NYSE:AR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on AR as the stock returned 293% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.